I've Dug A Hole For Myself Again

Out of sheer frustration at the amount of work needed to rehabilitate my condo and because I'm not so handy (I don't even own a power drill), I contacted a highly recommended general contractor to do some work for me. My list was initially short and modest. But as I was going through the work that needed to be done, I started adding in extras that I wanted.

Here was my original "need-to-do" list:
1.) Fix garage door opener and hardware ($650);
2.) Patch drywall and paint ceilings/walls and replace baseboards ($5,000);
3.) Replace corroded pipes under sinks ($1,000);
4.) Replace broken fire door ($950);
5.) Get HVAC/furnace serviced ($100 + repairs extra);
6.) Remove heavily soiled carpeting and replace ($4,000);
7.) Replace kitchen sink and broken garbage disposal ($1,325);
8.) Refinish tubs in master and guest bathroom ($1,650).
TOTAL: $14,675

Not too crazy, right? After all, most of those items were recommended by my inspector.

As I was walking through the condo explaining my needs, my mouth detached from my brain and started spouting off stuff I wanted done as well. Suddenly, I no longer wanted carpet; I wanted hardwood floors. I couldn't live with the ugly fluorescent lights -- I wanted recessed pot lights in the living room and kitchen. I also wanted a ceiling fan with lights in the master and guest bedroom, which requires additional electrical work. The drab laundry room needed some pizzaz, so I wanted a glass backsplash added to the walls between the cabinets. And here's the pièce de résistance -- I want the guest bathroom entirely remodeled because the fiberglass tub is old and cracked.

*Sigh*

I'll let you fine folks guess how much my revamped rehab/remodel job is going to cost me. I'm a bit depressed right now to tell you how I intend to finance this as well, but as I'm sure you've already guessed, I'm going back into consumer debt.

*Sigh*

Stiffing Bank of Mom and Dad

I previously wrote that my Snowball Plan will come to a screeching halt now that I'm purchasing a condo. In actuality, I've just revised my Snowball Plan, yet again, to include my anticipated new debts: my mortgage and the down payment lent to me by Bank of Mom.

Come 10/31/2011, my debts will look something like this:

10/31/11	Fed'l Sub'd Student Loan	$ 50,558.49	@ 5.125%	Fixed
	Mortgage	$ 274,000.00	@ 3.875%	Fixed
	Down Payment	$ 68,500.00	@ 0.000%	Fixed
	TOTAL	$ 393,058.49

Based upon these estimates, here's my new Snowball Plan ver. 3.0.

I know that the "real" Snowball Plan requires me too pay off my debts in the order of the smallest balance to the largest. I do plan to pay off my smallest debt first, but I'll also be snowflaking $4,000/year to my Bank of Mom debt.

Some would argue that the $4k/year snowflake should be applied to my student loans instead of to Bank of Mom. But I feel that Bank of Mom deserves the not-so-insignificant snowflaking since she was generous enough to lend me the money interest-free. Additionally, my mom's 69. God knows how much longer she'll live. She got a relatively clean bill of health recently so I'm thinking that she'll be good for at least another 10 years. Hence, my goal is to pay off Bank of Mom in 10 years. I guess I should also be prepared to make a balloon payment for the balance in the event my mom's health deteriorates prematurely. The bottom line is, I intend to take my debt to Bank of Mom seriously and will treat it no differently than any other debt to a "real" creditor.

I'm going to switch gears now and I'm going to engage in some catty gossip. My best friend recently confided to me that she and her husband also "borrowed" approximately $20,000 from the husband's parents for their down payment. It's been 8 years and they've paid back $0.00 so far. In the mean time, they've taken vacations, bought a new car and made improvements to their house. My BFF claims she feels guilty for stiffing the in-laws, but not guilty enough to initiate a repayment plan. My BFF further feels that it's her husband's responsibility to make the repayment arrangements since they are his parents.

I'm appalled at my friend's cavalier attitude about how she and her husband are stiffing Bank of Mom and Dad. I guess since her in-laws haven't said a "peep" about being repaid, perhaps the in-laws intended to "gift" the money. Either way, the issue has been swept under the rug and no one is dealing with it.

I'm a bit disappointed with my friend. No matter how you slice it, she and her husband are deadbeats. They're deadbeats because they're stiffing their family members on a significant sum. Even assuming that the in-laws were willing to gift the money, my friend and her husband are deadbeats since they didn't pay taxes on the non-exempt portion of the amount that was gifted to them.

I wonder if the in-laws have forgotten about the "loan"? Or I wonder if it will always stay in the back of their minds that their kid and his wife stiffed them?

Today's Schadenfriday

Schadenfreude [shahd-n-froi-duh]
def: Satisfaction or pleasure felt at someone else's misfortune.
[Origin: 1890–95; G, equiv. to Schaden harm + Freude joy]

I'm feeling a bit masochistic today so I'm going to confess a sickening financial mistake I made.

I just discovered that back in 1999, I consolidated my Federal Student loans into a graduated repayment payment plan at 2.23% APR. Under the graduated plan, I had to pay a minimum amount equal to the amount of interest accrued monthly for up to 30 years. My payments start out low and then increased every two years.

What, in my moment of brilliance did I do in 2006? I re-consolidated the loan to a 5.125% APR extended repayment plan. I chose the fixed monthly payment plan under which I would pay the same amount for up to 25 years.

What's bad about this whole thing is that I'm not sure why I re-consolidated back in 2006 to a higher APR. I suspect that I wanted the assurance of a fixed payment, versus an adjustable plan where my payments will gradually increase every two years.

But seriously, I voluntarily went from a 2.23% APR to 5.125% APR? I didn't have the foresight or intelligence to stick with the original plan and just pay ahead? Sheesh. Give me the bonehead award.

It makes me sick to my stomach that I was so clueless about my financial situation and I made serious, long-term decisions so casually and willy-nilly. I guess the silver-lining to this is that I've changed my ways and hopefully, I won't be making stupid mistakes like this in the near future.

Anyhow, it's been raining cats and dogs here. Too bad it's not raining men. :-D

Have a great weekend!

Snowballing My Private SL Within a Snowball

I took a break from my snowball plan in November and I'm back on that horse. I'm now down to paying off my last two debts -- my private student loans and my consolidated federal student loans (subsidized and unsubsidized). As of 12/31/09, I owed $43,182.39 on my private SL and $53,568.28 on my federal SL.

With that kind of balance, I'm not going to be able to pay it off in a short period of time, especially since I've decided against using my recent windfall to pay down my debts immediately. Bummer. But I thought it might make me feel better if I snowballed within my snowball.



Specifically, my private SL is broken up into 5 separate loans. Three of the loans were taken out during each of my law school year and the fourth was a "bar loan" that paid for my living expenses while I studied for the bar exam. The fifth loan is a head scratcher. It looks like a supplement loan for the 1997 school year.

Anyhow, here was the balance of my private SL as of 12/31/09:

Private Loan Breakdown	Original Balance	Balance As of 12/31/09
Bar Loan	$5,000	$4,139.63
1997 Loan Supplement	$3,500	$1,227.87
1997 Loan	$11,479.00	$10,535.84
1996 Loan	$14,242.00	$13,812.68
1995 Loan	$13,104.00	$13,466.37

My planned snowball payment towards my private student loan is $1,478/month. Rather than just letting the loan company apply the payment proportionally to each loan, I decided to aggressively pay down the smallest balance first.

My first snowball payment to my Private SL just posted and here's the current balance:

Private Loan Breakdown	Original Balance	Balance As of 1/20/10
Bar Loan	$5,000	$4,101.98
1997 Loan Supplement	$3,500	$171.09
1997 Loan	$11,479.00	$10,465.23
1996 Loan	$14,242.00	$13,718.82
1995 Loan	$13,104.00	$13,376.13

Looks like I'm on my way to paying off the 1997 Loan Supplement next month and the Bar Loan by April. :-D

Why does this matter? Back in December, I pulled my FICO score and it dinged me for having too many accounts with balances. Now that I'll knock down 2 account balances within 4 months, hopefully my FICO score will improve. (Yeah, yeah. I realize my FICO score is irrelevant unless I intend to take out a loan. But I eventually want to purchase my first home so I monitor it couple of times a year.)

Shedding The Last Vestiges of Credit Card Indebtedness

I started accumulating significant credit card debt in 1995. Once I started down this path, I became accustomed to living with debt. I saw my balances go up and down (mostly up) and I just paid whatever I could. I guess you could say that I expected myself to be in debt forever, especially since I also carried an onerous student loan debt (and still do.) I was really never successful in saving money and paying down my credit card debt.

At some undetermined point in my life, I decided to add a “credit protector plan” on my credit card. With the plan, I would pay approximately $0.68 for every $100 balance I had on my credit card. I wouldn’t need to pay my monthly minimum and I wouldn’t incur any interest in the event of a lay off, disability or hospitalization. Although I didn’t realize it at the time, I enrolled in this plan in lieu of having an emergency fund.

Flash forward to the present. I’ve paid off my stinking credit card and I’ve also managed to squirrel away some decent dough for my EF. I’ve concluded that I no longer need the rip-off credit protector plan.

I called Citibank to cancel the plan and, as expected, I faced some resistance. Initially, the telephone rep asked why I wanted to cancel my plan. I told her, “Because I no longer carry a balance month-to-month.”

The phone rep replied, “That’s wonderful! But this plan will allow you not to have to pay your credit cards in the event of disability, layoff or hospitalization. The benefits of this plan are quite exceptional and I will mail you some information as a refresher so you can have time to think it over.”

“Uh, no thanks. Please just cancel the plan.” (Internal dialogue: "That's what my EF is for.")

Undeterred, the phone rep pressed: “Since you’ve been a loyal customer for many years, I would like to offer you a discounted price of $XX for every $100 of your balance.” (At this point, I’ve stopped listening so I don’t remember the price she quoted me.)

Strangely enough, while I wanted to yell, “Just f&#*ing cancel the d&mn plan!”, I found myself giggling inside. I composed myself and said, “I admire your persistence. But my decision is firm.” (I didn’t want to be mean to the phone rep since she’s only doing what she’s required to do. No point in being nasty to someone for her employer’s idiotic policies.)

The phone rep finally relented and said, “Okay. I will go ahead and process your request. But I do want you to know that you’ve already paid $XXX into this plan and I would hate for you to let that money go to waste.” (Internal dialogue: “Uhhh… I think it was wasted the moment I paid it.”)

“Wait a second, how much have I paid into this plan to date?”

“$853.39.”

“Wow. Thanks for canceling the plan.”

I couldn't believe that I’d wasted $853.39 over the years to insure my financial irresponsibility. Once the shock wore off, I was dance-in-my-underwear elated that I no longer have to pay this premium. For some reason, this made me much happier than any of my recent milestones. Perhaps I was happy that I could brag about my financial accomplishments without guilt to my credit card company, albeit its lowly phone rep.

But after the ecstasy wore off, I calculated that I’d charged over $125,499 on this card over the years. (I’m assuming that the cost of this “insurance” remained constant at $.68 per $100.) OMG. And that’s just one card. God only knows how much interest the cc companies have made off of me...

Crash Diets Are Easy. Lifestyle Changes Are Hard.

Sorry for the lack of posts this week. Like most people, I gained an extra 5 lbs during the holidays. (The gift baskets, chocolates and other goodies we received at work from vendors haven't helped.) I've been trying to make a "lifestyle change" by incorporating exercise and healthy eating habits into my daily routine. When all I've been doing the past couple of years is sitting on my keister in front of the TV or computer, this change takes a bit of getting used to. I'm trying to get the hang of my new regimen and schedule.

I've been easing myself into a new lifestyle that is a compromise of eating/exercising moderately while very occasionally indulging in the so-called "bad" stuff. I know I won't lose weight quickly this way, but this is the only way to go. After all, I know myself - - I know I'll stick to a crash diet and exercise only for the short term because: (a) I'm a yo-yo dieter, (b) I hate exercising and (c) I love to eat, especially deep fried, salty, fatty foods. I'd rather try to aim for a lifestyle that may not be the paragon of health but is at least do-able for the long-term.

Just as much as I don't care for the boot camp-style crash diet and exercise, I don't care for the crash-elimination of my debts either. I'd rather attack my debts at a steady pace while trying to maintain a financially responsible lifestyle. (Keyword: trying.)

I bring this up only because I was pondering whether I should use my recent windfall to pay off a significant chunk of my private student loans. After careful consideration, I've opted not to do so based purely for psychological reasons, not economic.

I have a masochistic need to self-flagellate myself for the debt I've gotten myself into. Paying off a significant portion (over 50%) of my private student loans in one fell swoop with a windfall feels like cheating. Kind of like a weight-loss contestant who uses diuretics right before his/her weigh-in. I know, I know - - The analogy is not perfect. But just as water weight will inevitably return, I'm afraid that debt paid off with "easy money" will just as easily come back in a different form. I've witnessed too many people who "pay off" their debts by using inheritance money or refinancing their homes, only to get right back into debt. I have a deep seated fear that I will be one of them.

As you know, I fell off my snowball plan in October when I paid off my credit card debt. I spent money freely in November (and especially) December, knowing that I was going to come into the windfall. I have yet to get back to my frugal ways. I feel I haven't demonstrated to myself that I am financially responsible. Until I do so, I think it would be best not to put my debts on a crash diet. Instead, I'm sending my windfall to my savings account to gain some fat.

My Credit Card Pay Off Odyssey

After I paid off my credit card debt in October, one commenter asked whether I had any tips on paying off my $30k+ credit card debt. I think everybody’s circumstances are unique, so I’m not sure whether my experience will be useful to anyone. But here’s a recap of my experience:

1. Created A Budget and Monitored My Spending
This shouldn’t come as a surprise to anyone. I’m not going to elaborate why or how I created a budget since the PF blogosphere is replete with articles about the beauty of the budget.

My only advice is, don’t try to “wing it.” I tried and was short on funds every month. I now know that I need to know how much I could afford to spend every month AND also be vigilant about my spending. Just paying attention to one or the other never worked.

2. Liquidated My Assets to Pay-Down Debt Immediately
I discovered, during the course of creating my budget, that my monthly expenses exceeded my monthly income. Quelle fromage! (Or was it quelle horreur?) Anyhow, I knew that I needed to pay down my debts significantly to bring it under control.

I initially looked around my apartment to see if I had stuff to sell on eBay or Craig’s List. But I was mortified to discover that I only had cr&p. Serious cr&p. (Makes me wonder - - how could I have been $30k+ in cc debt and have nothing to show for it?)

But… despite my irresponsible spending, I fortunately did some things right. I regularly contributed money into my Roth IRA and I participated in my company’s ESOP program. This allowed me to liquidate $17,000 of my assets (i.e., $1,400 out of my savings, $6,300 of my after-tax contributions to my Roth IRA and $9,300 of company stock) to immediately pay-down my debts.

This was one of the scariest things I did, since it wiped me out financially and emotionally. But…. it did cut my credit card debt by half.

3. Increased My Take-Home Pay
I didn’t say I increased my income since I failed at those attempts. I asked my boss for a merit raise and I got laughed at. I tried getting a second job, but dropped out after a miserable month. (I now know I’m the world’s worst telemarketer.)

Instead of increasing my income, I decided to increase my cashflow. I increased my take-home pay by temporarily halting all contributions to savings, including my 401k. After setting aside some of the increased take-home pay for taxes, I dedicated the rest to paying down debt.

I probably did this for about 5 to 7 months until my monthly expenses finally were less than my take-home pay. At that point, I resumed my regular 401k contributions.

4. Confessed to My Friends and Family
One of the reasons why I kept falling off the financial wagon was because I tried to create the façade of being financially successful. Whenever my budget wouldn't allow me to go out (e.g. shopping, taking vacations and eating out) with my friends and family, I made excuses. I eventually got burnt out by all the lies.

I finally confessed to my friends and family about my crushing debt. Many were surprised, but supportive. They considered my new-found frugality “responsible” vs. “miserly.” I also discovered that other people were buried with debt too. I’d like to think that I inspired some of my friends to change their spend thrifty ways.

5. Snowballed My Debts
I just discovered that outside of the PF blogosphere, most people will suppress a smirk when I say, “You should try snowballing. It's great!”

Ahem. I know there’s a big debate as to which method of debt repayment is the best - - Pay off the debt with the highest interest first or pay off the debt with the lowest balance?

Dave Ramsey says you should pay off your smallest debt first because it will give you momentum and motivation to tackle your remaining debts. Feh. I say you should do this because once your first debt is tackled, it gives you some “breathing room.” When you eliminate one debt, you have the option to ease up on the stringent budget you initially set up for yourself.

Yeah, yeah. I know my budget shouldn’t change since I’m supposed to apply my extinguished debt payments into the next debt. But I think rewarding myself with a little bit after each extinguished debt will keep me motivated to soldier on.

For example, now that I’ve freed up my car loan and credit card payments, I technically have $1,558 that I could apply towards my private student loans. But I’ve decided to reward myself $80/month out of that sum with a monthly massage.

I know, I know – this will extend my pay off date. But do you know by how much? Only 2 months. Feh. I’ll enjoy my monthly massages, thank you very much.

6. I Arbitraged My Credit Card Debt
It’s a long story, but I thought I had a long time to pay off my credit card debt because Chase promised me a 5.99% APR for the life-of-the-loan. But, like many other credit card companies, Chase reneged and did all sorts of nasty things. Out of necessity and frustration, I transferred my credit card debt to a 0% APR card that was good for 8 months. I paid a 3% transfer fee for the favor, but it was worth the cost.

I paid the minimum due amount each month and “paid” additional amounts into my high interest bearing savings account. In order to ensure that I would have enough funds to pay off the credit card before the 0% promotional rate expired, I sold some company stock again. When the promotional rate expired, I withdrew the extra money from my savings account and paid off the balance.

~~~

There’s no two ways about it when paying off debt. You gotta suck it up, make sacrifices and pay, pay, pay. It’s always the hardest when you first start. But the initial hardship eventually wears off and you get used to your new budget and financially responsible lifestyle.

By the way, it took me over 4 years to pay off $30,000 in credit card debt. It's easy to get discouraged every time you come across a set-back, but you just have to keep plowing forward.

I can almost see the end of my debt payment odyssey, but it won’t be any time soon (ETA 4 years). I know that I still have a long ways to go and the hardest challenges may still lie ahead. But I know I’ll fight like hell before I let myself fall back to where I was when I started this odyssey.

My Short-Term, "Free Spending" Days Are Coming To An End...

I started my debt snowball plan some time in July or August last year. At the time, my car loan had a balance of $8,500.50 and my credit card had a balance of $12,943.59. I paid off my car loan in February and I paid off my credit card debt in October.

I have to admit, it was a freakin' struggle to pay off $21,444.09 + interest in a little over a year! During that time, I had to deal with my jealousy /inferiority demon when I was with my financially better-off friends. I didn't have any money to spend to go out with my friends since my food + entertainment budget was $8.70/day. This budget was driving me nuts since I'm a total junk food junkie and I love eating out. But there was no other way I could afford paying $788/month in car payments and $265/month in cc payments in addition to $865/month in student loan payments.

I know the debt snowball plan required me to immediately roll my now extinguished car and cc payments into my next smallest debt, which is my private student loans (current balance ~ $44,700). But I needed to take a breather. I gave myself until the end of the year to spend $1,053/month however I saw fit.

I'm not proud, but I truly did spend every penny of the extra $1,053/month since October. What did I spend it on?

1.) Side trips to Washington D.C. and Chicago. (Note: I took the trip in September but I had to pay the piper, i.e. my cc, in October.)





2.) Eating out whenever I felt like it.(Which was almost always.) I normally don't dine out at chi-chi restaurants. I heart my local ethnic hole-in-the wall eateries. But I do like to splurge on a meal every so often. One of my most memorable meals in the past couple of months (other than the dine-n-dash restaurant) was at Rick Bayless' Frontera Grill in Chicago. Since Frontera doesn't take reservations, my sister and I waited nearly 3 hours to get a table. We had hibiscus martinis and shared a Tostada de Atun y Erizo at the bar. The tostada was absolutely mind blowing! But by the time we got sat, we were tired and exhausted. I ordered a watermelon agua fresca, pork tamale, goat enchilada and flan. The food was excellent, as you would expect. But I think I would've enjoyed the meal more had I not had to stand around for 3 hours, elbow-to-elbow with other patrons, waiting for a table.


Is any meal worth a 3 hour wait? No. Next time, I'll dine at Topolobampo, the sister restaurant next door that does take reservations.

3.) White Gold (14kt) and Yellow Gold (10 kt) Hoop Earrings for about $80/each. I bought white/yellow gold plated earrings at Macy's last year for about $20/each. I love those earrings but unfortunately, the plating on the earrings either discolored or flaked off. I decided to replace them with something more substantial. I'm happy I did (despite the fact that the metal in the yellow gold earring is excessively malleable).

4.) Casual lounge wear: My mother often bemoans the fact that I dress like a hobo at home. (Being able to dress like a hobo without recrimination should be one of the benefits of being single!) My "fanciest" lounge wears date back to 2003. (Ha ha.) I didn't go too crazy with this purchase, though, since I got a couple of track suits from Old Navy.

5.) Michael Kors black trench coat: I totally splurged on this one at Nordies - - $148. But it's totally worth it because it's soooo cute. (And we all know that "cuteness" justifies any expense. Not!) I'll probably wear it over the next decade, so I'm not going to kick myself for this.

6.) New PJs, bras, panties and other misc. clothing

7.) Snuggie! ($19.99 at Costco.) Laugh all you want. I suffered a really bad case of the flu and bronchitis this year. While I was congested, I had to sleep upright and my blankets always fell off my shoulders. I thought to myself, I could really use a Snuggie. Although I bought it after I recovered from the flu, I still love my Snuggie.

~~~

I'm sure there were more stuff I bought or consumed that belonged in the "want" and not "need" category. But these were the highlights.

I enjoyed the past couple of months of hedonistic spending. But it's now time to tighten the belt. I re-did my budget and I'm going to start paying $1,478/month towards my private student loans in January. That means I have to go back to living on a budget in December. *Sigh*. But at least I'm going to treat myself to a monthly massage ($59 + $20 tip) from now on. :-D

I am so going on a spending binge once this frickin' private student loan is paid off! (I'm estimating 30 months or so.)

I Am Now Officially Credit Card Debt Free

I’ve carried a balance on my credit cards since 1995, while attending law school. I didn’t have an income at the time and I was living off my student loans, but I still had a certain lifestyle I wanted to maintain. It started with $20 here for dinner, $100 there for a trip to Vegas with my buddies, $10 for movies, etc. I wasn’t too worried – I’d be okay so long as I can make the minimum payment every month.

After I graduated, I had new “needs” like snazzy power suits, shoes and purses to wear to court. The increase in my lifestyle costs dramatically outpaced my income during this period. I needed to dine at Spagos -- after all, I was now an attorney. I also couldn’t possibly be seen driving a hand-me down 1986 Toyota Corolla. I “needed” to lease a more respectable car.

Even when I stopped practicing law in 2001, I wanted to maintain “the lifestyle.” Again, for no logical explanation, my lifestyle costs skyrocketed upwards with no regards to affordability. I didn’t pay attention to my balances since I always seemed to have a balance transfer offer readily available to “bail me out.”

But some time in 2005, I had one of my many “aha” moments - - my consumer debts snowballed to levels that I could no longer make the minimum payments. To add insult to injury, American Express rejected my credit card application for a 0% balance transfer.

I created a handwritten list of my debts in 2005 in a Steno Notebook that I still keep as a reminder of those dark days. My debt balances at the time were:

Private Student Loans: $57,950.98

Fed’l Student Loans: $61,364.22

Chase CC: $16,572.72

Discover CC: $10,538.94

Citi CC: $ 9,602.12

Car Lease (remainder): $1,562.16

TOTAL: $157,591.14

Oh, and let’s not forget that in December 2005, after I turned in my leased car, I took out a $25,000 car loan to buy a new car. So setting aside my student loans, my total consumer debt (credit card, car loan) as of December 2005 was approximately $61,713.78!!

In fits and starts, I ventured onto the rocky road of debt repayment I’m currently on now. It took me over 4 years, but I’ve finally rid myself of the soul-crushing consumer debt-hole I dug for myself 14 years ago. My student loan balance is still mortifyingly high (approximately $98k), but I feel the end of my debt voyage is nearing.

I’d like to say that I’ll immediately snowball my $1,053/month credit card payments into my student loan payments. But, alas, I think I’m going to give myself a “breather” until the end of the year. I’m five months ahead of schedule vs. my Snowball Repayment Plan I created in August 2008, so I think I deserve a break.

I’m planning to spend some of the money, but I’m hoping to replenish some of my earmark funds for vacation and other miscellaneous spending. I finally feel like I’m on my way towards financial freedom.

Random Thoughts About My 3rd Paycheck and Bank Failures and One Confession

July is a 3-paycheck month and I got my first-of-three paycheck yesterday. I immediately transferred my money to my savings. I wish I could say that I "bank" my 3rd paycheck but alas, I can't. I instead disburse 1/6th of it to myself every month until the next 3-paycheck month comes along. Eventually, I hope to eliminate my debts to the point that I can just bank my 3rd paycheck as savings. Someday....

~~~

So my spendaganza goes on. I just bought myself my first EVER digital camera. Yes, it's time I joined the 21st century.

I bought a Panasonic Lumix DMC-ZS1, 10.1 MP camera with 12x optical zoom at Costco, using a $50 off coupon and a $100 gift card. The camera normally retails for $299-$330. With the discount and gift card, I paid about $155, including tax. The price includes a carrying case a 2 MB memory card. Not too shabby, wouldn't you say?



Costco offered a $50 off coupon last December. I really, really wanted it at the time, but decided not to. Ever since, I rued my decision of not taking advantage of the $50 off coupon. When I recently saw that Costco was offering the same coupon again, I decided to jump on this opportunity. I'm hoping that the 12x optical zoom will come in handy when I go see the Pageant of the Masters next weekend!

~~~

Holy guacamole. Have you seen the FDIC list of bank failures in 2009? Most of these banks had less than $1 billion in assets but it's still very unnerving.

As my faithful readers know, I'm arbitraging my 0% credit card debt by paying the minimum and putting my money in a 2.0% savings account at DollarSavingsDirect.

Bankrate gave Emigrant Bank (the parent company of DollarSavingsDirect) a 1-star rating as of 12/31/08.

Although I don't think Emigrant Bank will go under before October (when my 0% promotional rate expires), I also don't want to take any chances. I'll be transferring my money to SmartyPig (the online partner of West Bank). Bankrate gave West Bank 3-stars. Better yet, SmartyPig's current APY is 2.75%.

My FICO Score Improved...

...from 712 to 723. Dagnabbit! It's still a couple of points short of my goal of 725.

I purchased my score from myFICO. You can purchase a standard FICO score for $12.76 (usual price $15.95) before May 31st by using the promotion code: FICOMAY20.




Nothing new here. I already know about my past late payments on my student loans. Only time will resolve this issue.

But another issue that's dragging my score down is the fact that I'm currently using 18% of my credit limits right now. This too will be resolved in October when I plan to pay off my $11,000+ credit card debt. The credit card balance currently has a 0% APR until October so I'm in no hurry to pay it down before then.

The myFICO site has a pretty cool simulator that will estimate how certain actions taken can affect your score. I simulated a scenario where I paid off my credit card debt in 6 months. According to myFICO, my score should improve to about 723 - 763. If I can get beyond 760, that should get me into the top 2% of all credit scores. Cha-ching!

Additionally, in a couple of years, assuming I keep paying my bills on time, my delinquent record should fall off and my score should improve to 813 - 850 range. Awesome!

In another 6 months, I'm planning to purchase my FICO score from TransUnion. I've heard that TransUnion scores are a bit more lenient. If my CreditKarma score is any indication, I suspect that may be true. We'll see.

I'm not sure why I bother to check my FICO scores since I don't intend to make any new purchases. But I guess I do so because my FICO score is a report card on my financial progress. And my report card tells me I'm on my way.

Thank Goodness I Don't Have to Write Another "Dear John" Letter

Warning: This post has a slight "adult" content at bottom.

I currently have a $9,367 (net) credit card balance with BofA at a promotional 0% APR until 10/28/09. According to the Wall Street Journal, Bank of America is raising the interest rates on credit card customers who carry a balance.

Et tu, Brute? Do I have to write another Dear John letter?

I called the customer service rep over the weekend and learned that the increased credit card rates affect only contract rates, not promotional rates. I was verbally assured that promotional rates will be honored unless I breach the terms first (i.e., I make a late payment). The customer service rep even offered additional 0% balance transfers, should I have the need to do so.

No, thanks. It's always good to remember than when you're stuck in debt, credit card companies won't help you out. They're more like the second cow in the pastoral scene below that's been making the viral email rounds:





Come hell or high-water, I'm paying off my credit card debt before October 28th!

Perhaps I HAVE Changed My Spendthrift Ways?

If you look at the details of my networth, you'll see that I have shloads of credit card debt. I wish I have a good excuse for it, but I don't. It was spent on designer purses, jewelry, fancy vacations,restaurants and shoes. You know, all necessities. ;-D

Although I strive to live a simpler and more frugal life, my spendthrift way is just lurking right below the surface. I have this nagging doubt that I haven't changed organically or internally at all. I can't help but to think that I'm only reacting to external factors, such as an impending layoff and my debts.

But something happened yesterday that made me think that perhaps I have changed. A SHOE EMERGENCY!! [Cue dramatic music.]

It happened near the end of the work day. I was walking, walking, walking until I heard a big crack and my left leg wobbled. Thank goodness (?) I have short legs and a low center of gravity since I would've otherwise done a face-plant.

Anyhow, the old Shtinky would've taken this as a true emergency. I would've left work early, headed to Nordstrom or Macy's to buy a replacement pair of shoes. $350 for a pair? Wow, that's expensive, but I have the credit-limit available! No problem!

And don't think the thought didn't cross my mind. In fact, I'm ashamed to admit I seriously PONDERED whether this qualified as an "emergency" thus allowing me to tap my emergency fund. After all, I AM at work and I shouldn't be walking around barefoot in the office, right?

Wrong. I sucked it up and taped up my heel. Can you see the clear tape around the left shoe in the picture?



Perhaps it wasn't really safe for me to walk around in the taped-up shoe, but how dangerous is it for me to walk from the office to my car to my apartment? Not much.

I'm proud to say, I've decided not to replace the shoe. I have several other similar style shoe in the same color. I'm seeing this as a good sign that I've changed my spendthrift ways. :-D

Okay, enough with patting myself on the back; I'm moving on to a rant.

I swear, I will never buy Jessica Simpson shoes ever again. It's not expensive but it's not cheap either. A shoe should last more than a couple of years, don't you think? I mean my Stuart Weitzman shoes have lasted me over 7 years! (It needs serious polishing, though. Heh heh.)

I guess this is a lesson learned: Buy good shoes, especially if you intend to wear them for a long time.

P.S. Hope you're all having a wonderful Passover and Good Friday. And have a wonderful Easter!

To Opt Out or Not Opt Out?

I promise this will be the last post EVER about my archnemesis, Chase. (My prior posts can be read here, here and here.)


For those of you who are new to this blog, I've summarized my dysfunctional relationship with Chase below. For those who are already familiar, skip down to #7:

1. A long time ago in a galaxy far, far away, Chase offered me a 5.99% APR balance transfer that was supposed to be good until I paid off the balance. *SCORE!!* I transferred over $13,000 to my Chase card and I paid the minimum balance (2% of balance) every month religiously and on time as part of my debt snowball plan.


2. Chase purportedly advised me back in November '08 of the following change in terms of the credit card.



3. Oblivious to the unilateral change in terms, I didn't discover the $10 service charge and the 250% increase in my minimum payment until January 2009. I transferred my balance to Bank of America's 0% offer.


4. Because I knew Chase is a bloodsucking bank, I sent an additional $30 to cover any interest charges accrued.


5. Again, completely oblivious to the other change in terms, I discovered on February 5 that Chase will continue to charge me $10/month, regardless of whether I carried a balance or not. Chase tried to blackmail me to do a balance transfer to 7.99% APR to avoid the $10/month service charge. I told them to go pound sand and closed my account.


6. Chase closed my account and sent me a $20 refund and billed an additional $13.76, rather than issuing me a $6.24 refund. (Greedy and incompetent!)


7. I sent Chase a $15.00 payment and demanded a refund after the February billing month closed. Chase refunded me $21.24 in March as a "Fin Chrg Refund".

Woo hoo! I thought I got my service charge back because I'm so special. But turns out that Chase only agreed to refund $4.4 million of these bogus "service charges" in response to NY AG Cuomo's investigation and several class action lawsuits.

Which begs the question: Should I opt out of the class action lawsuit?

I do believe that Chase breached the spirit of the original balance transfer agreement and engaged in the classic "bait-and-switch" tactic, which could be fraud in the inducement. I therefore believe Chase should be penalized for their actions.

But did I suffer any damages from Chase's actions? No matter how I look at it, the answer is decidedly, "No." As a matter of fact, Chase may have actually improved my situation.

Had Chase honored its original balance transfer offer, I would not have paid off my car loan until July 2009 and my credit card balance until July 2010. (See, my originial snowball plan.) But when Chase started charging me bogus fees, I vowed to speed up my debt repayment plan. Consequently, I paid off my car loan 5 months early and I'm on track to paying off my credit card balance in October 2009 (i.e., 9 months early).

So in summary, Chase's breach cost me:
$358.17 in balance transfer fee to BofA + unquantifiable damages for reduction in credit limit of $18,500.

But Chase's breach saved me:
$48.13 in car loan interest + $639.15 in credit card interest (assuming I'll pay off my credit card in October '09)

All in all, looks like I came out ahead in this whole Chase debacle and hurray for me. But what if I didn't have the ability to transfer out my balance and close my account? I would've been in a world of hurt, or at the very least, I would've ended up with a higher APR, which Chase would have probably increased steadily.

As a matter of principle, I've decided to opt out of the class action since I haven't been damaged by Chase's actions. Let the people who've actually suffered from Chase's fraud/breach of contract collect on any settlement money that Chase will likely pay.

On a related note, I received an offer from Chase to open a checking account this past weekend. If I made 5 ATM purchases with the Chase ATM card, they would give me $100. Bah! Keep your stinkin' money, Chase. I hate you and will no longer do business with you - - yes, even if YOU paid me!

Slave to Consumerism and I'm Happy

Good posts and comments should challenge your current way of thinking and ParanoidAsteroid's recent critique and the Frugal Bachelor's comment about another PF blogger's post really hit home. Perhaps, I've given consumerism an undeserved bad rap.



I'm currently $11,000+ in credit card debt. As if that figure isn't embarrassing enough, I was more ashamed that I have nothing to show for it. Sure, I have a pair of diamond earrings and pretty decent wardrobe. But nothing like antiques or an extensive haute-couture shoe collection like Carrie Bradshaw.

And since I kept lousy records, I'm not exactly sure where all the money went. But I'm pretty sure that one of my top spendings was on food. I thought to myself, of all the stupid things I've done (which are many), going into debt for something I consume and literally piss away, takes the cake. (Oh goodness. I never thought I would use "piss" and "cake" in the same sentence. Sorry for the disgusting imagery.)

Last year, in my quest for financial responsibility and personal redemption, I implemented a pretty spartan food budget, which means I rarely eat out and my home-cooked meals generally consist of easy-to-make food. Admittedly, over the course of the year, I fell off the horse a few times, but I've done relatively well sticking to the budget. But somehow, there was always an under-current of feeling deprived.

In a recent MSN SmartSpending post, The Simple Dollar wrote:

In a way, I almost looked down on people who are frugal, particularly people who actively choose frugality over simply buying the best. I felt pride in my possessions and experiences -- and I looked at people who chose different paths as needlessly depriving themselves.
...
What I've learned is that a sense of being deprived -- provided, of course, that your basic needs are met -- is just a negative state of mind.
...
Frugality isn't choosing to be deprived. It's just a different way of looking at things.

I'm guessing that the point TSD wants to make is that money spent beyond obtaining basic necessities of life has a diminishing rate of return for happiness. And I agree.

But for every dollar we spend beyond providing for basic sustenance, aren't we all in varying degrees, buying some increased level of contentment, if not happiness? And what's so wrong about buying some fleeting moments of joy?

And what if some experiences can usually only be bought?

I come from a culture that places great importance on food as a spiritual and communal activity. In essence, my culture stresses the importance of appreciating food, not merely as a source of sustenance but also as a medium for appreciating nature and art.

As a result, I deeply appreciate food, and not just food from the old country -- all kinds of food, particularly ethnic foods. Give me a good hot piping bowl of Vietnamese Pho rather than chicken noodle soup. I'd rather clog my arteries with Phillipino deep fried lechon versus chicken-fried steak. And when someone says "barbecue", I immediately think "Korean".

Consuming good food and a variety of food gives me great joy. And this often means that I'd have to eat out since:

• Ingredients to make cuisines from the old country is expensive since much of it is imported;
• It is generally not cost-effective for me to cook for one;
• One of the downsides of a culture that places high-importance on food is that great emphasis is placed on not only the cooking method, preparation and taste, but also the aesthetics of the cuisine itself. I certainly cannot replicate some of the food that ethnic restaurant chefs have been trained to do.

And I'm not talking about restaurants like Joel Robuchon that serves a $385, 16-course meal, or a $150 omakase-meal at Nobu's.

I'm talking about enjoying a $1.50 taco made with cow-head meat from a street vendor. I'm talking about the joys of discovering that something as disgusting looking as a sea-cucumber can actually be very tasty. I'm talking about the joys of sharing a traditional, communal hot-pot meal with someone who has never eaten food from my native country.

Was it really that bad for me to feel deprived when I chose not to eat food that I truly love for the sake of frugalism? If that makes me a slave to consumerism, so be it. I'll just practice a more responsible form of consumerism-slavery. :-D

My Hypothetical 20% Pay-Cut Challenge

I've been talking to former colleagues who've already been laid off by my company. Few lucky ones have been able to find jobs with equivalent pay and comparable benefits, but most have taken jobs with pay cuts and fewer benefits. I asked how much of a pay cut they took, but none were willing to discuss specific figures. (I'm a bit ashamed of being so tacky and nosy, but I was curious for my own sake.)

It's not unheard of unemployed workers now taking 30%-70% pay cuts in their new jobs. In this article, one former bank employee went from a $125,000 salary to a $66,000 salary. Another former mortgage lender went from earning $110,000 to $33,000.




I'm relatively confident that based upon the industry that I'm in, I probably won't face such a dramatic salary decrease in my next job. But I AM expecting to take a significant hit in my salary, so I spent the weekend thinking how I'd deal with a hypothetical 20% pay-cut.

EXPENSES
I've concluded that I want to continue to maintain my current standard of living, so I'm not going to alter my spending, even in the face of a 20% pay cut. Fact of the matter is, I'm living a pretty frugal life right now. It's not like I'm living the high-life by subscribing to premium cable channels, drinking expensive wine, dining out regularly, buying Starbucks coffee, etc.

The big bulk of my expenses are eaten up by rent and debt repayment. The rest of my budget is quite modest. Although I'm open to the idea of a roommate, I'm not yet at the point where I am willing to share my living quarters with a stranger. With respect to my debt, my credit card should be paid-off by year end. However, I want to continue with my debt snowball plan and roll the credit card payments into my student loans. In other words, paying off my credit card really doesn't give me much relief.

Some people have suggested that I eliminate my cable TV/high-speed internet service/land line service. This is a great idea, but I'm not inclined to eliminate my internet service since I do a lot of online banking and I do not want to do so on a shared computer in a public place. Although I don't need cable TV, it's my primary source of entertainment, and I'm not going to give it up so easily. I also like having my land line, since out-of-state calls to my parents and big sis are included in the monthly flat fee.

INCOME ADJUSTMENTS
It's a bit depressing that a 20% pay cut will set me back to where I was in 2004. Looking at my 2004 paycheck, I've estimated what my take-home pay will be after taxes and other expenses. I then took out some expenditures that will help bring my take-home pay to what it is now.

	% of Current Paycheck	% of Pay-Cut Paycheck
Fed'l Income Tax	15.01%	16.25%
Social Security	6.15%	6.21%
Medicare	1.44%	1.45%
CA Income Tax	5.04%	5.60%
CA SUI/SDI Tax	1.09%	1.18%
FSA	0.51%	0.63%
ESOP	3.0%	0.00%
Long Term Disability Ins.	0.55%	0.00%
Personal Accident Ins.	0.09%	0.00%
Pre-Tax Dental	0.13%	0.38%
Pre-Tax Medical	1.06%	3.09%
401k	15.00%	2.00%

Through this exercise, I've concluded that I need to do the following:

• Eliminate my ESOP contributions;
• Eliminate long-term disability insurance coverage;
• Eliminate personal accident insurance coverage;
• Reduce my 401k contribution from 15% pre-tax to 2% (ouch).

I've also discovered that my current company's medical and dental benefits are cheap compared to other employers'. Based upon what my big sister is currently paying for her medical and dental benefits, I'm anticipating that these costs could easily increase 3x.

It pains me to have to dramatically reduce my 401k contribution and savings rate, especially at a time where I can dollar-cost average my retirement investments cheaply. But at least I have the comfort of knowing that I won't be sacrificing the pace of my debt elimination. Once my debts are paid off (hopefully before 2014), I'll boost my 401k contribution at such time.

Oh, what a fun exercise this was...

Dave Ramsey Is A Big Fat Liar

Eh, I’m just joking, but not really. Based upon my own personal experience, Dave Ramsey's book, The Total Money Makeover, is premised upon a flawed concept that is common to all self-help books. Specifically, it bases its advice upon a generalized assumption of human behavior, when in fact, most individuals are complex and often irrational.



As you all know, Dave advocates the debt snowball which requires you to pay off your debts in the order of smallest balance to highest, regardless of interest rates. The debt snowball is based upon the notion that paying off the little debts quickly gives you a “psychological boost” to tackle the next debt.

Well, I just recently paid off my first debt (car loan) and I have to admit, I’m happy, but not AS happy, as I thought I would be. I’ve waited and dreamed over 3 years about the day I would pay off my car loan. I imagined handing my check to the credit union teller and jumping for joy and squealing when she hands me the zero balance receipt.

Truth be told, I was excited that morning, but the whole event itself was disappointingly anti-climactic. Perhaps I was building the whole final payment event up in my mind to the point that I was setting myself up for disappointment.

Worse yet, I expected to feel the way Dave Ramsey said I should, but haven’t. Dave virtually promises in his book that I would feel so great after paying off my first debt that I would be extra motivated to tackle my next debt!!

Uhhhhh…. In reality, I am just relieved to have the $788/month obligation lifted from my shoulders. As a result, I’m now feeling a strong desire to give myself some “breathing” room in my monthly budget. And as I’ve previously mentioned, I’m battling spending demons as I write this.

I’m getting tired of constantly monitoring my spending, deciding what’s a need vs. want, and choosing to forego relatively minor purchases like a $40 cordless phone. (Wah, wah, wah, whine, whine, whine, I know!)

Perhaps I never had the “gazelle intesity” necessary to successfully follow-through with the debt snowball. Or, hopefully, as Abigail from I Pick Up Pennies suggests, maybe I’m just suffering from “frugal burnout” that waxes and wanes. Or, perhaps I’m feeling blue and I’m seeking retail therapy.

I don’t know. But I feel like a recovering addict who is tempted to revert to old habits.

So let this be a warning to all: the purported pyschological boost of the debt snowball is overrated. Instead, you will find yourself at a fork in the road after overcoming your first hurdle.

Next month, I have the choice of either: 1.) saving the $788 car payment with the purpose of paying off my credit card debt in October as per my revised snowball plan, or, 2.) spending some or all of the car payment money on other stuff.

I know which is the right road to take. I just don’t know if I have the emotional strength to do the right thing.

Friday the 13th Is My Lucky Day – I Paid Off My Car Loan!!

According to my original Snowball Debt Reduction Plan, I was planning to pay off my car loan in July. Instead, I decided to take money from my earmarked savings and my Emergency Fund to pay off my car loan early. Woo hoo!!

MSN Money recently highlighted a post from Kristy at Master Your Card, that discussed whether using one’s EF to pay off a car loan is appropriate. (Blogger Kristy opined that an EF should not be used to pay off a car loan.)

I felt a bit defensive, so I left a comment that one should do what one feels comfortable doing. I personally would not feel comfortable wiping out my EF or reducing it down to $1,000 to pay off a car loan, but I certainly felt comfortable spending $1,716 of my earmarked savings (bye-bye computer) plus an additional $2,219 of my EF to pay off my car loan. I still have $6,089 remaining in my EF and $1,908 remaining in my earmarked savings. Admittedly, it’s not much, but I still have something left.

Additionally, my EF is currently only earning up to 3.05% APY in interest, but my credit union is charging 4.75% APR interest on my car loan. Paying off my car seemed like a no-brainer.



Before I go on, here are some facts about my car loan:

Date borrowed: 12/15/2005
Total Purchase Price: $25,500 incl. tax, title and registration
Amount borrowed: $25,000
APR: 4.75%
Term: 5 Years (But paid off in 3 years, 2 months.)
Minimum Monthly Payment: $469.10 (Total of 60 Payments: $28,146)
Total Paid: $27,336.24
Interest Paid: $2,336.24
Interest Saved From Early Pay-Off: $809.76

Now that my car loan is paid off, I’m planning to use the car payments to pay off my credit card. Since my credit card debt is currently at 0% APR, I will put the car payments into a “high”-yield savings account until the promotional 0% interest-rate expires in October.

I’ll also remove the Blue Book value of my car in my net worth calculation at the end of the month since my car is a depreciating asset and I have no intention of selling it any time soon. I might as well take the write down now, rather than later.

I plan to keep my current car for another 10 – 12 years. If all goes to plan, (knock on wood), I’ll pay off all of my outstanding debts in 6 years. I can spend the final 4-6 years of my current car’s life to make “imaginary car payments” to myself to save up for a new car that I will buy with cash-ay. I vow NEVER to borrow money to buy a car again.

Anyhow, hope you're having a great Friday the 13th. I certainly am! :-D Hope you have a Happy Valentine’s Day tomorrow too!

Chase, The Zombie Credit Card Company That Won't Die

I am extremely frustrated because I am trying to wash Chase out of my hair completely and yet it won't go away like a stubborn blood sucking nit. (For those who are unfamiliar with my recent spat with Chase, my prior posts can be read here and here.)

Anyhow, here's a brief summary of what transpired:

1. Chase purportedly advised me back in November of the following change in terms of the credit card.



2. I discover the $10 service charge and the 250% increase in my minimum payment in January 2009. I make the decision to transfer my balance to Bank of America's 0% offer.


3. Because I know Chase is a bloodsucking bank, I sent an additional $30 to cover any interest charges accrued until the balance transfer takes place.


4. I discover on February 5 that Chase will continue to charge me $10/month regardless of whether I carry a balance. Chase tries to blackmail me to do a balance transfer to 7.99% APR to avoid the $10/month service charge. I tell them to go pound sand and close my account.


5. Chase closes my account and sends me a $20 refund (which I have not yet received).


6. Chase is now billing me $13.76, when it could have just issued me a $6.24 refund instead of $20.

Frustrated, I ranted at a poor customer service rep at Chase. He assured me that the $13.76 won't accrue any interest since it arose out of finance charges and only the principal balance accrues interest.

How much do you want to bet he's full of cow patty and I'll get a bill for 5 cents interest next month? Chase is becoming a zombie company I can't get rid of!

And to think Chase is one of our better financial institutions? I think I see why we're in the midst of the economic crisis we're in now.

Please, Chase, just go away. I hate you.

Ohhh... This Is Going to Hurt...

Okay folks. Do you remember the unilateral change that Chase made on my credit card? In case you don't remember, Chase purportedly slipped this notice in my November invoice:



Anyhow, apparently, the $10 service charge applies even if I don't carry a balance on my credit card, since they charged me again on 1/30/09 even though I have a $30 credit on my account.

According to the customer "service" rep, I have 2 options to avoid the $10 service charge: (a) opt out and cancel my card or (b) transfer a balance to 7.99% APR. It is irrelevant that I no longer carry a balance.

Aghast, I told the Chase rep, "Just cancel my card."

Chase is out of my life now. Forever. Good riddance.

But I've now reduced my available credit limit by $18,500. Ouch. Ohhhhh... This is going to negatively hit my FICO score. But it's better than forking over $10/month to a bunch of crooks, right?